KADEX 2024 Banner 728x90Shedding light on the details of the impending $4.7 billion (US $3 billion) transfer to US shipbuilding coffers has always been difficult – but thanks to the Senate Estimates process on May 6 more information is becoming available.  An almost identical handout to UK companies is also finally coming under scrutiny, and the results don’t look pretty.

Under questioning from Green’s Senator David Shoebridge, the Head of the Australian Submarine Agency, VADM Jonathan Mead, refused to answer a series of questions about whether Australia will get its money back if the US fails to transfer Virginia class submarines in the 2030s.

Having established – with some difficulty – that under the agreement, $1.5 billion will be transferred next Financial Year and $1.8 billion will go in 2025-26 (with some possible variations because of exchange rates), Senator Shoebridge asked what would happen if the sale to Australia did not go ahead.  This might be because a future US President simply might not authorise the sale – a logical possibility.

The written transcript hardly does justice to the awkwardness of VADM Mead’s attempts at deflection:

Sen Shoebridge: What if the United States determines not to give us a nuclear submarine? Is there a clawback provision in the agreement?

VADM Mead:  That’s a hypothetical and I’m not going to entertain…

Sen Shoebridge: I’m not asking about hypotheticals. I’m asking about what’s in the agreement. Is there a clawback provision in the agreement?

VADM Mead: The US has committed to transferring two nuclear-powered submarines to Australia.

Sen Shoebridge. You know that’s not my question VADM. I’m asking right now, as we sit here, is there a provision in the agreement that we get our money back if the US doesn’t live up to its side of the bargain? Surely you included that? Are you telling me you didn’t?

VADM Mead: The US has committed to transferring two nuclear-powered submarines and a third one…

Sen Shoebridge: So, there’s no clawback provision?

VADM Mead:  …we are investing in the US submarine industrial base.

Sen Shoebridge: Whether we get one or not?  You cannot be serious.

VADM Mead:  The US has committed to this program.

Sen Shoebridge: You know it depends on a Presidential approval, don’t you?  The US has made it 100% clear that it depends on that approval.

VADM Mead: That is your statement, which I refute.

Sen Shoebridge: VADM, you know that the US legislation says that the US can only provide an AUKUS attack class submarine to Australia if, first of all, the USN gives advice it won’t adversely affect their capacity. Secondly, after receipt of that, the US President approves it. Do you understand that?

VADM Mead: Yes.

Sen Shoebridge: And if neither of those things happen, we don’t get a sub. Do you agree with that?

VADM Mead: I agree with that.

Sen Shoebridge: Does the agreement provide – the one where we are shelling out $1.5 billion next year and $1.8 billion the year after that and another $1.7 billion or more over the rest of the decade – if the US does not provide us with an AUKUS submarine then we get our money back?

VADM Mead:  The US will provide us with an AUKUS submarine.

Sen Shoebridge:  Did you not understand that my question wasn’t about a future hypothetical. I’m asking about what’s in the agreement.  Is the reason why you won’t answer what’s in the agreement is because it embarrassingly it fails to have that detail?

VADM Mead: You are talking about a future hypothetical.

Sen Shoebridge: I’m talking about what’s in the agreement now.

VADM Mead: The US will provide two transferred submarines….

Sen Shoebridge: It may be embarrassing that you have entered into an agreement that sees Australian taxpayers shelling out $4.7 billion – which we don’t get back if we don’t get our nuclear submarines. That might be embarrassing, but that’s not a reason not to answer. Does the agreement have a clawback provision?

VADM Mead: The US is committed to transferring…..

Sen Shoebridge: The only way of reading that answer is no – and it’s embarrassing. Do you want to explain why it’s not in the agreement?

VADM Mead: I go back to my statement that the US is committed to providing two submarines.

This excruciating exchange continues further with VADM Mead seeming reluctant to admit that he does not know who the future US President will be, or who will be in Congress several years from now.  With limited time available, less information was provided about the situation with the UK, but apparently whatever agreement exists it also does not contain a clawback provision.

A small section can be viewed here: https://www.abc.net.au/news/2024-06-07/submarine-bossmulti-billion-aukus-payments/103952528

APDR will run the entire 5 minute clip of VADM’s humiliation when it becomes available, along with the full written transcript.

Even if there is only a small chance that the US will not transfer submarines to Australia, there should have been a clawback clause.  This is standard legal practise for all purchases – everything from a nuclear-powered submarine to a toaster.  None of this is affected by the huge amount of enthusiasm people have for AUKUS – this should be simple commercial reality.

It looks as if VADM Mead has never been questioned in detail, and as the transcript shows he was evasive and unconvincing throughout.  This is exactly what happens in hermetically sealed organisations such as the RAN where the word of a superior is never questioned.

This is no way to run any program, let alone one worth untold billions of dollars.  It’s also no way to run a government and Ministerial collusion in a clearly defective process should greatly concern all Australians, but particularly the millions of people experiencing cost of living pressures.

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Kym Bergmann
Kym Bergmann is the editor for Asia Pacific Defence Reporter (APDR) and Defence Review Asia (DRA). He has more than 25 years of experience in journalism and the defence industry. After graduating with honours from the Australian National University, he joined Capital 7 television, holding several positions including foreign news editor and chief political correspondent. During that time he also wrote for Business Review Weekly, undertaking analysis of various defence matters.After two years on the staff of a federal minister, he moved to the defence industry and held senior positions in several companies, including Blohm+Voss, Thales, Celsius and Saab. In 1997 he was one of two Australians selected for the Thomson CSF 'Preparation for Senior Management' MBA course. He has also worked as a consultant for a number of companies including Raytheon, Tenix and others. He has served on the boards of Thomson Sintra Pacific and Saab Pacific.

30 COMMENTS

  1. I thought the Navy was meant to be getting more than 2 Virginia class Submarines.
    Anyway looking at US ship building plans I can’t see how the US is going to be able to transfer any Submarines to the RAN. They can’t even replacement their current fleet as they don’t have the workforce or ship yards to do so.
    The level of incompetence is frightening really.

      • Yeap, I agree with you.
        Whilst the US Navy is building new SSBNs at the moment industry is only capable of building a max of 3 SSNs every 2 years (and that is stretching it). However to replace their current SSNs they need to build 2 SSNs every year. The US Navy still has 23 Los Angeles class it needs to urgently replace with the oldest being 37 years old.
        And we haven’t even talked about how the US Navy doesn’t even have the ship yards to maintain it’s current fleet.
        All that equals no submarines for the RAN. It just doesn’t seem at anyway possible unless the US Navy is prepared to drop down to 40 odd SSNs to give up some of them for the RAN.

        • Tim – you are absolutely correct. I don’t see how a future US President can ‘legally certify’ to Congress that a sale to Australia does not detract from the capability of the USN when clearly it will.

        • “And we haven’t even talked about how the US Navy doesn’t even have the ship yards to maintain it’s current fleet.”

          Isn’t there a solid argument that that will make it more attractive to transfer submarines? If they can’t maintain them, and we have spent the last decade or so by that point building up our industrial base to the point where we can, then they’re better off active in the hands of an ally than tied up pierside inactive waiting for a maintenance slot.

          • Maybe – but that’s contradicted by the official methodolgy. For what it’s worth, that says that the two second hand Virginias in the 2030s will have received major upgrades in the US prior to the sale, and Australia won’t need to do any serious work on them for several years. I agree that if they were to sell us a couple of boats sitting idle in the maintenance queue and say “if you can make them work, they are yours” that might make sense, but that’s not the plan.

  2. The whole AUKUS deal is a debt trap, lots of “Trust Me , we won’t screw you over” and Empty Rhetoric about what good mates we are. This is a business deal, pure and simple and the fact is we’re being taken for a ride. How on earth you can enter into a contract without protecting your end is incomprehensible. The Powers that be need to come clean with the whole deal .The trouble is nobody is being told anything and it started to smell real bad. The (so called) Minister of Defence should earn his keep Andy not duck shove everything on to others.its no use asking the Top Brass of the ADF, once you get above the Rank of Commodore, Air Commodore or Brigadier in the Military you stop being Soldier, Sailor or Airman and start becoming a Politician.

    • The more that is uncovered the worse it gets. I recommend reading that section of Senate Estimates I based the article on when it becomes available. There was a lot of back-and-forth about the “agreement” to transfer the $4.7 to the US and an identical amount – with a similar lack of justification – to the UK. I now have a sneaking suspicion that there is no ‘agreement’ at all. I suspect this is a handshake deal done by a couple of Admirals over a bottle of whisky and their staff have followed up with some emails.

  3. If Mead is an example of senior officers in the RAN then it’s no wonder the RAN is in the state it is and why it is getting steadily worse.

      • AUKUS is perfect cover for politicians and senior officers alike.
        Do nothing except handover taxpayer’s money and then have someone, the US and UK, to blame when it fails.
        The timeframes are great for them as well.
        They’ll all be sitting back on the pension when it fails.

        • Just imagine the outrage if it were revealed that a government had made donations of 2 batches of $4.7 billion to companies to build a hospital without a refund clause. No hospital? So sorry, the money has gone.

  4. Nothing about this makes sense and all leads to the RAN acquiring 0 of the promised 3 – 5 Virginia Class boats all at a huge, non refundable donation from the Australian taxpayers.

    So the next question is will the plan then be to wait until the UK AUKUS boats start to come online? Am not convinced that the Collins class life extension is a good option particularly given the cost. Would it be better to introduce an interim class of new conventional boats fitted with the sensors and equipment that would be fitted to the AUKUS boats?

    Either way the RAN has been put in an unenviable position yet again by people making ill conceived plans and decisions to suit a political agenda rather than the operationally sound decision.

    VADM Mead is clearly a figurehead only and a mouthpiece for his political masters. This would also appear to be the case with those managing the Frigate project. I read an article this morning regarding the accelerated selection process and this article reinforced the current Defence imposed embargo on contractors discussing any aspect of the project outside of basic information.

    Wondering if we will still be discussing which submarines and frigates (lets not even bring up the mine countermeasures fiasco) in 20 or 30 years from now.

    • I suggested a couple of years ago to cancel the Collins LOTE and build new KSS-III Batch 2 submarines from Korea instead. The GP Frigate project is an unbelievable mess.

      • I believe that the Kss-III would be the best option. Even as an interim boat until the BAE AUKUS boats are in the pipeline. From what I have seen the costs would be about the same as the LOTE for the Collins. Added bonus could be the vertical launch tubes on the KSS-lll which may provide an option to operate Tomahawk cruise missiles.

        • Great idea. The vertical launch tubes section should become a replaceable pod for either, VLS, fuel for extra range, Special Ops equipment etc.

        • agreed. Either the Kss-111or the German 212. We could wait for the British nuke boat as you state but we must be mindful it has a lot of USA involvement and USA may not be happy if we called the deal off

          Could be returning to France for a nuclear boat may be an option. Its low enriched uranium has attractive positives

  5. There was an article i read elsewhere a while ago interviewing a US General/Admiral or something…and whilst its true that the US is struggling with submarine output, he viewed the transfer of 2 to Australia as a net gain.

    The US gain a nuclear capable shipyard in the region, that is fully capable and up to scratch for performing maintenance on Virginia class submarines. And all the parts and logistics supply chain that goes along with it. diversify the supply chain and gain thousands of trained personnel that they’re not paying for (aussie submariners). Its part of a larger strategy goal.

    • Yes, Australian taxpayers will fund the massive expansion of HMAS Stirling to the tune of $7 billion so that four Virginia class submarines can be permanently based there from 2027.

  6. Too simple points.

    While all of this is interesting and stomach churning. There is a a more pertinent question to be asked. Was the VADM part of the group that formulated the payment structure and agreement. Yes or No? If the answer is no, he is just the poor bunny that has to try and sell this lemon, he needs to provide a lists of authors of this document. If the answer is Yes, then whose side is he on?

    Secondly, the VADM is showing contempt of the Senate hearing. He is not the first, many people before him have. It is about time that the law be upheld and fines or imprisonment be used. It is quite clearly nominated here https://www.aph.gov.au/About_Parliament/Senate/Powers_practice_n_procedures/Senate_Briefs/Brief13

    • Yes, I thought he was extremely close to being in contempt of the Senate. Unfortunately this sort of mindless arrogance has become typical of AUKUS boosters. There are many questions about this: a) how was Australia’s donation calculated; b) who negotiated the agreement; and c) who authorised it. Clearly the numbers are just made up: US $3 billion donation + US $2 billion via FMS for training. In real life, nothing ever adds up to these nice round numbers.

  7. I don’t know if we have sent any of that money yet but I would hold off until after we know who will be the next US president.

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